UK shares of Micro Focus nearly double after OpenText in Canada agreed to a $6 billion takeover
A sign stands outside Micro Focus’ offices after it and Hewlett Packard Enterprise Co announced that Hewlett Packard Enterprise Co was selling its non-core software assets to Britain’s Micro Focus International in a deal worth £8.8 billion US Dollar will be spun off and merged in Newbury, UK. September 8, 2016. REUTERS/Eddie Keogh
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- OpenText buys Micro Focus in cash
- Will allow OpenText to expand in enterprise info management
- Micro Focus shares surge 92% in early trade
- British company recommends transaction to shareholders
Aug 26 (Reuters) – Shares of Micro Focus (MCRO.L) rose more than 90% on Friday after Canadian software company OpenText (OTEX.TO) agreed to take the enterprise software maker in an all-cash deal to buy UK company valued at $6 billion including debt.
In a push to grow its enterprise information management business, OpenText announced Thursday that it would pay 532 pence ($6.30) in cash for each Micro Focus share, a premium of 98.7 % to Micro Focus’s closing price on Thursday, giving the company a market cap of approximately $10.00 billion.
Micro Focus shares rose to a more than a year high of 518 pence in early trade.
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The British company said it considered the terms of the deal to be “fair and reasonable” and would recommend shareholders vote in favor of the acquisition, the joint statement said on Thursday.
Micro Focus, based in Newbury, Berkshire, has $4.4 billion in debt on its balance sheet, according to its most recent earnings report.
OpenText will fund the transaction by raising $4.6 billion in new debt and $1.3 billion in cash, and drawing $600 million on its existing revolving credit facility.
Speaking to analysts, OpenText chief executive Mark Barrenechea said the company can stabilize Micro Focus’s business and accelerate its cloud transition.
Micro Focus helps customers maintain and integrate legacy IT technology, a business that has grown through the acquisition of legacy technology such as mainframe computer software used by banks, retailers and airlines.
OpenText, one of Canada’s largest software publishers, expects cost savings of $400 million upon closing of the transaction. The deal is subject to regulatory approval.
U.S.-listed shares of the company fell 4.8% in after-hours trading on Thursday.
Barclays acted as financial advisor to OpenText on the transaction, which is expected to close in the first quarter of 2023.
Micro Focus was advised by Goldman Sachs and Numis.
($1 = 0.8448 pounds)
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Reporting by Eva Mathews and Yadarisa Shabong in Bengaluru and Krystal Hu in New York; Edited by Vinay Dwivedi, Arun Koyyur and Susan Fenton
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